RBS Challenges Barclay's Bid for ABN AMRO

On Monday, Barclay's Bank offered to buy Dutch bank ABN AMRO for £45 billion, which the board of ABN AMRO quickly accepted. This is the biggest bank deal in history. However, a consortium led by the Royal Bank of Scotland was well miffed (bordering on vexed) with the rapid approval. It has made a higher offer at £49 billion, and the Dutch bank has agreed to open its books to the RBS group. A bidding war lies ahead.

If the Barclay's bid were to go through, the resulting bank would have 47 million customers (by way of comparison, South Korea has a population of just over 49 million) and 27 million credit card holders (almost twice the population of the Netherlands), 217,000 staff and revenues of £94 billion annually. It would be a UK-owned firm with tax residence in Amsterdam. At the same time, ABN AMRO would sell off its US LaSalle operation to Bank of America for $21 billion.

The RBS crew, which includes Spanish bank Santander and Belgian bank Fortis, made its offer on Wednesday subject to an examination of ABN AMRO's books. Management said the Barclay's bid remained the "best option" for shareholders, but it agreed to give RBS and Co. a look at the books. The upcoming shareholder meeting had something to do with that. Also, the deal would only go ahead if the sale of LaSalle got dropped.

The lawyers have descended to see if the deal to sell LaSalle can be undone. Bank of America says it has a "legal contract" and "expects that contract to be fulfilled under its current terms." There's a pretty huge fee for backing out. That doesn’t seem to bother some shareholders who have launched a lawsuit to stop the Barclay’s bid.

This suit could be significant. ABN Amro’s deal with Bank of America closes May 6 unless the court blocks it or ABN receives a higher bid from someone else. LaSalle is the poison pill in all of this, and as it goes, so goes ABN AMRO. The banking business is often seen as boring and stodgy, but this particular tale is going to rival any Hollywood blockbuster the way things stand now.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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